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Salli London Research Report June 2010
Salli London Research Report June 2010
LONDON | 2010
index results
INFLATION RETURNS TO THE LUXURY GOODS SECTOR illustrated by record art auction results in early 2010, which
was subsequently sustained as the world record price of
The Stonehage Group, a leading Multi Family Office advising $106 million was paid for Picassos Boy with a Pipe at an
Ultra High Net Worth (UHNW) individuals and international art auction in New York.
families, today announced that prices of luxury goods and SALLI this year would have been lower had it not been for
services in London increased by an average of 0.6% in the 12 the increase in VAT to 17.5% at the beginning of the year
months to the end of April 2010, marking a small return to price which has affected the baskets of goods used to make up
inflation following a 3.7% deflation the previous year. both SALLI and CPI.
As the UK imports many luxury products and as SALLI
This small increase, measured by the London edition of includes overseas travel destinations, the relevant price
Stonehages Affluent Luxury Living Index (SALLI), compares to an movements have also been affected by fluctuations in the
average inflation rate of 3.7% measured by the UK Consumer Price foreign exchange rates. When considered with the VAT
Index (CPI) over the same period. This inflation trend below CPI rate changes, the evidence suggests that the luxury goods
is expected as the cost of luxury goods and services recover from and services market absorbed such pricing factors within
the lows in the recession at a more cautious rate in comparison to the domestic market.
more general costs of domestic goods and services.
Ronnie Armist, Director at Stonehage Investment Partners,
Last year, SALLI highlighted the deflationary reaction of commented: SALLI allows Stonehage Investment Partners to
luxury goods and services during a recessionary economic analyse the real costs that affect our clients. The return of a
environment. SALLI this year reflects similar themes, but with small level of inflation, as measured by SALLI, after last years
more cautious price recovery when compared to the CPI. deflation, points to some recovery in the prices for luxury
goods and services. However, HNW consumers are continuing
Key findings include: to negotiate discounts in key spending sectors such as luxury
travel accommodation. With general inflation rising modestly,
HNW inflation is much more volatile than the standard rate as evidenced by CPI, and continued weakness in the economy,
of inflation, as measured by the CPI, tending to exceed it looks unlikely that luxury inflation will pick up strongly.
standard inflation in good times and significantly fall short
in times of downturn. Stonehage Affluent Luxury Living Index (SALLI) London, a proxy
High-end residential property rentals in central London for price inflation experienced by London-based HNW and
decreased by more than 8%, a reflection of an increase UHNW families, was first published in 2007 in order to track
in the supply of property and a decrease in demand as the the prices of a basket of luxury goods and services regularly
recession hit City jobs. purchased by UHNW clients. The basket forms the basis of the
Luxury consumables rose 24.1% on the back of rises in wine index and consists of approximately 50 goods and services on
and luxury foods such as caviar. a per use weighted average basis. The basket includes items
Inflation in the travel sector dropped to 0.6% from 11.7% a such as private education, central London rental costs for a
year earlier, as small increases in cost of flights were more family property, a days grouse shooting and fine wine and
than offset by decreases in the prices of luxury cigars, based on Stonehages knowledge and experience of the
accommodation, as travel companies continued to offer spending patterns of London-based UHNW families. Prices in
discounts, packages and special incentives. Last years the index are the recommended retail prices (incl. VAT) and
figure was impacted by big increases in the costs of private SALLI accounts for the frequency of purchase of each item over
air travel. one year. Prices were recorded between 2002 and 2010.
The investments of passion category, which includes cars
and luxury clothing, showed a significant price increase The index methodology was verified by Professor Geoffrey
of 5%, as the prices of luxury cars recovered from the heavy Wood of the Cass Business School.
discounting of a year ago, when inflation in this category
was 2%.
The culture and entertainment category was up 15.2%
compared to a 20.5% decrease a year earlier. This
was partially driven by a significant increase in art prices,
overview
Stonehage is a leading independent multi-disciplinary Family Office offering wealth management and advisory services to an
international clientele. Stonehage works with clients to protect and enhance their wealth across jurisdictions and generations. Our
interests are aligned with those of our clients.
Stonehage is owned by management and staff with ten offices around the world. Established in 1976 the Group currently employs
over 320 staff and manages the affairs of over 1,000 client families internationally. Stonehage was awarded the Family Office of the
Year award in 2009 by the Society of Trust and Estate Practitioners.
1. CONSUMABLES
Beluga Caviar
Food
Foie Gras
Smoking Cohiba Siglo V Cigars
Liv-ex 100 Fine Wine Index
Drink
Liv-ex 25 Champagne Index
Nobu (19 Old Park Lane)
The Ivy (1-5 West Street)
Gordon Ramsay (68 Royal Hospital Road)
Restaurants
Hakkasan (8 Hanway Place)
Le Caprice (Arlington Street)
Tamarind (20 Queen Street)
2. INVESTMENTS OF PASSION
3
COMPONENT ITEMS OF THE SALLI INDEX 2010
6. travel
disclaimer: This publication is intended to provide only general information and to highlight points of interest. It is not intended
to be comprehensive or sufficient for making decisions and should not be relied upon. Specific professional advice should be sought
on the facts of any matter before action is taken.
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